Since disclosing third-quarter results, the social media behemoth turned pioneer of the metaverse has seen a significant decline in the price of its shares.
The day after Meta Platforms (META 0.62%) released its earnings, the meta stock price dropped by as much as 25%. The confluence of declining revenue and increasing expenses did not sit well with investors. Meta platforms reported fiscal 2022 3rd quarter earnings results that were dismal to say that investors were disappointed in these results to be an understatement, The stock was down 24% on the following day the earnings were released. Now let’s see what investors are upset about the Meta platform 3rd quarter earning results.
Overall revenue decreased by 4% to 27.7 billion in the 3rd quarter. This is now a few consecutive quarters in which meta platforms revenue has fallen year over year. This follows a period in which over the last decade excluding these recent events meta platforms were growing revenue at a compound annual growth rate of 40%. So this is a traumatic turnaround from the robust revenue growth the company was experiencing. Earnings per share of a dollar 64 were down 49% from the same quarter last year. Dismal reports top and bottom line and you can see why meta platforms investors were so disappointed in the current quarter.
So daily family active users across all the platforms like Whatsapp, and Instagram is 2.9 billion, an increase of 4% year over year. So on the plus side, meta platforms are still attracting users to their platform and you can say that nearly half of the planet’s 3 billion people are daily active users of one of the meta platform apps. So that’s good news. And of course, meta platforms apps are free to use and they generate revenue by selling advertising to marketers, to gain access to these 3 billion users. And the average price per ad in the most recent quarter was down by 18% from the same quarter last year. While the number of ads delivered increased by 17%. So meta platforms are showing users more ads. But it’s receiving a lower price per ad.
Now we can understand that meta platforms’ average price per ad was down 18& year over year. So more than 30 times the decrease from the alphabet and the difference in the delta in the decrease in the change for meta platforms because meta platforms are more significantly negatively impacted by Apple’s privacy policy changes that impacted advertisers’ demands. Suppose you are not aware that in 2021 Apple changed its privacy policy which gave consumers the right to not allow their activity to be tracked on the iPhone and other devices. And so that’s made it more difficult for meta platforms to track user activity and then sell targeted advertising. That’s why marketers like to sell targeted advertising because it’s more efficient.
So these changes are the reasons why meta platforms’ average price per ad is falling so significantly. And there is no short-term fix to this. Meta platforms have known about these changes since 2020.
They’ve been working on countering these changes and that’s gonna take time management to say. It may never come to the point where it’s able to sell the degree of targeted advertising it was able to do before these privacy policy changes were implemented.
And so as meta platforms investors realize the negative impacts from this that are causing the stock prices to fall significantly and down tremendously in 2022 over all. It’s down over 24% since the latest earnings were released. And to make matters worse facebook reality lab segments lost a total of 9.4 billion in the nine months so far in 2022. This is the reason why they changed their name to a meta platform. They are aggressively turning themselves into a metaverse business.
The management is thinking their stock is undervalued and they are buying back their stock at an accelerating rate. So the metaverse could generate 5 trillion in revenue by 2030. So the investors may be overreacting to the near-term negative aspects of meta platforms’ results. Meta platforms still boast nearly half of the planet as daily active users. Marketers cannot sidestep them. They are way too powerful in terms of population access. So if marketers want to advertise they need to with meta platforms. They need to use their services.
